In the article linked by Telos, note the following:
Quote:
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Photoshop CS2 is a 32-bit application. When it runs on a 32-bit operating system, such as Windows 2000 and Windows XP Professional, it can access the first 2 GB of RAM on the computer.The operating system uses some of this RAM, so the Photoshop Memory Usage preference displays only a maximum of 1.6 or 1.7 GB of total available RAM. If you are running Windows XP Professional with Service Pack 2, you can set the 3 GB switch in the boot.ini file, which allows Photoshop to use up to 3 GB of RAM.
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So (unless you have set the 3GB switch as described above) your OS and Photoshop are only accessing 2GB of your 4GB total. The OS is using 0.3GB, so that obviously leaves 1.7GB for Photoshop (which is what it is reporting). Even if you set the 3GB switch,
PS will still only be able to access 3GB of your total 4GB.